Marvel's Hits and Misses

David Gardner: Peter Cuneo is the vice chairman of Marvel (NYSE: MVL) and the former CEO of the company. He joins us from CBS studios in New York City. ... Peter Cuneo, welcome back to The Motley Fool Radio Show.

Peter Cuneo: David, it is my pleasure to be here.

David Gardner: First things first. Peter, Elektra did not have a very big opening weekend at the box, pulled in around $12 million. I am a Marvel shareholder myself. I like the possibility of Jennifer Garner's star power expressed through a Marvel superhero, but the movie reviews by almost any standard have been abysmal. Should I be disappointed? What is your take on the opening weekend of Elektra?

Peter Cuneo: Well, I think we are disappointed. Marvel has had a tremendous track record of success. In fact ... we have had nine successful films in a row, all in live action, and nobody actually in the history of the movies has a better record in live action than we do. Unfortunately, life is such that nobody is perfect, and regardless of what you are talking about, what studio, what actor, what director, everyone from time to time has disappointments.

David Gardner: Do you view disappointing box office results as the fault of the director, or is it the movie studio, or is Marvel itself at all to blame? Where do we look for accountability here?

Peter Cuneo: I think the accountability is a combination of Marvel and Fox (NYSE: FOX) . I wouldn't put the blame on any one individual. We sort of take the credit when we do well, and we have to take some of the negatives when we don't do well. I think the thing to mention about Elektra, though, is that Elektra is a film with a very narrow demographic compared to many of the things that we do. It is a film in which... the character is not well-known with the general public, so for this particular film we did not have any toy line or any licensing, so actually the financial downside to us is virtually nil. This particular result will not change the financial guidance that we have given Wall Street for 2005.

David Gardner: Peter, I am looking at pretty low box office results for a couple of recent ones. I mean, The Punisher was not a big movie. Some people felt that The Hulk underachieved, and now we have Elektra. Do you think poor performance at the box office hurts the popularity of superhero movies overall? Do poorly reviewed or low-draw movies make it harder for Marvel to do good business in the future?

Peter Cuneo: Well, I don't agree with you that The Hulk was disappointing or Punisher. The Hulk did $250 million worldwide box, which is a huge box, and as you may recall, we had tremendous success with our toy line, which was a complete sellout, over $100 million worldwide. Our licensing was also very, very strong, and we had a complete sell-through of all of the consumer products associated with Hulk. So from our point of view, while some people may have been predicting higher box office, we were very thrilled with Hulk, and Hulk 2 is currently being worked on. That is the ultimate test for success or failure. If films make money, then there will be sequels. So Hulk 2 is being worked on now by Universal.

In addition, The Punisher was a relatively small-budget movie. It was an R-rated movie, which always limits the box office. Now regardless of what people thought of the box office on Punisher, we have had very good results with the DVD, and THQ (Nasdaq: THQI) has just released a video game, and it is doing extremely well. So in the end, Marvel will make money from The Punisher franchise, and once again, Punisher 2 is being worked on right now by Lions Gate (NYSE: LGF) .

David Gardner: OK, so I didn't know about Punisher 2. I did know about Hulk 2, and for the record, I enjoyed the Hulk movie, but it does seem as if there were a lot of people had expected more of a summery-crazy fun feel to The Hulk rather than a more artistic expression of the character. Such a strong character in the Marvel library.

Peter Cuneo: Well, there will be a Hulk 2, and I believe that the creative approach will be different from Hulk 1. I think Marvel is a victim, to a certain degree, of our own success. We have set the bar so high with Spider-Man, of course, and with X-Men, that everybody expects every film we do to be a tremendous smash in the Top 10 of all-time box office worldwide. Of course, that is not going to happen.

I think the thing to remember for investors in Marvel is to go back a little bit to our strategy. Remember that we often talked about the layering strategy. We are introducing a lot of new character franchises into the marketplace. They are new, but they are old. These characters have been around a long time and have been proven commercially in the past. But our strategy really is to layer in 10, 15 different franchises. You know what? All of them may not be successful. We can accept that, but we have so many opportunities here to do that. Of course, the big new opportunity coming is Fantastic Four for this summer.

David Gardner: ... I am a video gamer myself, and I noticed that at EBGames.com, Electronic Boutique's (Nasdaq: ELBO) No. 1 computer game retailer's website, The Punisher video game is up on their best- seller's list of games not quite out yet. It is out very shortly. How much does that matter to Marvel? How big a deal is a best-selling video game today to your business model?

Peter Cuneo: Well, video games are very important. Right now our biggest licensed area is toys, but we fully expect that video games will eventually surpass the toy business simply because it is a whole area of entertainment of escape that is growing and growing. The demographic is widening. The games are getting better, and this is a very important area for Marvel. And by the way, looking back at our video games, we have had some hits, and we have had some misses. Again, while we would like to be successful with absolutely everything we do, we are human, and we know from time to time we will disappoint.

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